The 25-year-old has only started in seven league games and spent more time on the bench this season. He started against the La Liga giant's latest 3-0 victory over Eibar on 11 April and a report claims he has fallen out of favour at Santiago Bernabeu.

Carlo Ancelotti signed Germany's World Cup winning star Toni Kroos last summer. The arrival of the midfielder from Bayern Munich has seen Illarramendi drop further down the pecking order and is no longer included in the Italian manager's plan.

The former Real Sociedad man is aware of his current situation at the Spanish capital club and is looking for an exit at the end of the summer. The Spaniard has several offers on the table and is weighing his options as he is looking for a move to England.

Arsenal have long been interested in signing the Spanish star and the Gunners have reportedly made an approach in signing him this summer. Brendan Rodgers' side has now joined the race and have stepped up their interest in the last few days.

The report from Marca suggests the Merseyside club are preparing a "succulent offer" in order to beat Arsenal in signing Illarramendi. Despite the interest from the north London club, the player has his heart on making a switch to Liverpool at the end of the season.

Bayern midfielder Xabi Alonso, who played alongside Illarramendi at Real has urged the Liverpool manager to make an approach for his compatriot, reports talkSPORT. If the Spanish outfit and the Reds could reach an agreement, the player will join Rodgers' side.

Meanwhile, Liverpool will take on Newcastle United in the Premier League clash at Anfield on Monday. The English champions Manchester City suffered a 4-2 defeat at the hands of Manchester United at Old Trafford.

The Reds are sixth on the table with 54 points and with a victory over Newcastle, Liverpool will be four points behind fourth place City.